So, what is happening today is not as important as what will happen in the foreseeable future.If rents are increasing faster than inflation (I use 5% per year as an average rate), then it may be worth holding the property, since your cash flow will increase as rents rise.However, in your post you stated, "Mortgage rates have kept increasing as well, that's why I put a range on negative cash flow."

The rates will be lower and will allow you to maximize profits.

We raised $4.5 million in equity and got $4.5 million in fixed rate debt from Freddie Mac at a 5.85% rate.

Sellers back out, timelines change, and circumstances shift.

No fees = higher rates.

Let's break it down with precision:The "Pain" (At First Glance):Your $2.8M sale splits out as:Building (§1250): $2.3MPersonal Property (§1245): $500KOriginal Basis Allocation:Building: $1.6M (depreciated over 27.5 years)Personal Property: $400K (fully depreciated)Building Depreciation:Annual: $1.6M ÷ 27.5 = $58,182Total over 10 years: $581,820Gain Breakdown:Building (§1250):Sale Price: $2,300,000Original Basis: $1,600,000Less Depreciation: ($581,820)Adjusted Basis: $1,018,180Total Gain: $1,281,820Unrecaptured §1250: $581,820 (25% max rate)Capital Gain: $700,000 (20% max rate)Personal Property (§1245):Sale Price: $500,000Adjusted Basis: $0Ordinary Income: $500,000The Strategic Play:Remember those suspended passive losses you couldn't use?

The zoning changes will make California a hot real estate market.

(The exception would be the rare deal where the property changes hand for a price far below real market value).The sub to or wrap adds a certain degree of ADDITIONAL risk of failure.  

Due to current interest rates, many CAP rates are much lower than they should be and usually there is only so much price discount a non-delinquent seller will be able or willing to offer.

They also, last minute, changed an 8 bed Fourplex to a 6 bed.